Mercury NZ posted a 19% increase in first-quarter trading margin to $445 million despite hydro inflows falling to the second percentile. New wind and geothermal output helped offset weaker hydro generation, while major renewable projects moved closer to full operation.
- Trading margin up 19% to $445 million
- Hydro inflows at the second percentile, versus 71st percentile a year earlier
- Kaiwera Downs Stage 2 reaches full generation with 155MW added
- Kaiwaikawe’s 12 turbines installed and generating since July
- FY27 EBITDAF guidance reaffirmed with $300 million to $400 million growth CAPEX planned
Low Hydro Inflows Fail to Derail Q1 Margin
Mercury NZ Limited (ASX:MCY) produced a $445 million trading margin in the three months to 30 September, a 19% increase on the same period a year earlier. The result came despite Waikato hydro inflows sitting at the second percentile, compared with the 71st percentile in the prior corresponding period.
The company’s generation volume was 2,526GWh, with stronger wind and geothermal production helping offset a 332GWh, or 24%, reduction in hydro output. The result gives Mercury a useful early test of its diversified generation portfolio, although the operational data remains unaudited, preliminary and subject to change.
Renewable Projects Move Into Generation
The quarter also marked the operational handover of major renewable assets. Kaiwera Downs Stage 2 has reached full generation after a $486 million expansion completed in two years, adding 36 turbines and 155MW of installed capacity. The milestone completes a project first highlighted during earlier Kaiwera turbine testing, which had been under way before the project reached full output.
At Kaiwaikawe Wind Farm, all 12 turbines are now installed and the facility began generating in July. That advances a project previously described as on track for first-half FY27 operation, while Puke Kapo Hau Wind Farm is expected to begin works in November 2026 after earlier progress on the development.
Capital Spending Keeps the Build-Out Moving
Mercury expects FY27 sustaining investment, or SIB CAPEX, to be around $150 million. Growth CAPEX is forecast at between $300 million and $400 million, indicating that the company intends to keep funding its renewable development programme while staying within its stated financial guardrails.
The company reaffirmed that it remains on track to deliver FY27 EBITDAF guidance, but did not provide a revised numerical target in the update. Chief executive Stew Hamilton said the first-quarter performance demonstrated earnings resilience and reflected disciplined portfolio management.
Next Test Is Converting Capacity Into Full-Year Earnings
Mercury’s early result is favourable, but the more demanding question is how consistently the new wind capacity performs through the rest of the financial year. Subsequent updates will need to show whether renewable generation can continue to compensate for hydro variability, while the planned Puke Kapo Hau start and projected capital deployment add execution milestones to the FY27 story.
Bottom Line?
Mercury has started FY27 with stronger margin despite unusually weak hydro conditions; the next test is whether new renewable capacity delivers consistently as investment rises.
Questions in the middle?
- Can the expanded wind portfolio sustain the margin advantage if hydro conditions remain weak?
- Will Puke Kapo Hau begin construction on schedule in November 2026?
- Can Mercury deliver FY27 EBITDAF guidance while keeping growth CAPEX within the $300 million to $400 million range?